Because wage and hour class and collective actions are quite costly for employers to defend against, this decision should cause employers in Connecticut (and nationwide) to re-evaluate their employment relationships with employees and consider enacting wide-ranging arbitration agreements that include class-action and collective action waivers.

The decision in Epic Systems Corp. v. Lewis (download here)was just released at 10 a.m. this morning, so I’ll have more in an upcoming post after I’ve had time to digest it, but here’s the summary from the Supreme Court itself:

In each of these cases, an employer and employee entered into a contract providing for individualized arbitration proceedings to resolve employment disputes between the parties. Each employee nonetheless sought to litigate Fair Labor Standards Act and related state law claims through class or collective actions in federal court. Although the Federal Arbitration Act generally requires courts to enforce arbitration agreements as written, the employees argued that its “saving clause” removes this obligation if an arbitration agreement violates some other federal law and that, by requiring individualized proceedings, the agreements here violated the National Labor Relations Act. The employers countered that the Arbitration Act protects agreements requiring arbitration from judicial interference and that neither the saving clause nor the NLRA demands a different conclusion.

Until recently, courts as well as the National Labor Relations Board’s general counsel agreed that such arbitration agreements are enforceable. In 2012, however, the Board ruled that the NLRA effectively nullifies the Arbitration Act in cases like these, and since then other courts have either agreed with or deferred to the Board’s position.

Held: Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the NLRA suggests otherwise.

Justice Gorsuch writes the majority opinion here and concludes: “The policy may be debatable but the law is clear: Congress
has instructed that arbitration agreements like those before us must be enforced as written. ” He criticizes the dissent for its language suggesting a retreat from modern day labor laws:

In the dissent’s view, today’s decision ushers us back to the Lochner era when this Court regularly overrode legislative policy judgments. The dissent even suggests we have resurrected the long-dead “yellow dog” contract. … But like most apocalyptic warnings, this one proves a false alarm. … Our decision does nothing to override Congress’s policy judgments.

Justice Ginsburg writes the dissent and concludes:

If these untoward consequences stemmed from legislative choices, I would be obliged to accede to them. But the edict that employees with wage and hours claims may seek relief only one-by-one does not come from Congress. It is the result of take-it-or-leave-it labor contracts harking back to the type called “yellow dog,” and of the readiness of this Court to enforce those unbargained-for agreements. The FAA demands no such suppression of the right of workers to take concerted action for their “mutual aid or protection.”

It’s an “Epic” day at the Supreme Court. Will this have the same effect for state law claims? How should employers implement these changes? When? For all employees?

Lots of questions but today, at least, the Supreme Court answered one of the biggest employment law questions out there.

“Joe, in response to all this NFL stuff, we want you to display U.S. flags at your workstation.”

“No.”

“Well, then you’re fired.”

Don’t think that can happen? Then you haven’t heard about the Cotto v. United Technologies Corp. case — a long-forgotten Connecticut Supreme Court case from 20 years ago that has particular meaning in today’s environment where standing for the national anthem has become front page news.

Is this patriotic too?

The basic facts are as I described them above:

The plaintiff alleged in his complaint that he was employed on a full-time basis by the defendant for approximately twelve years.

In April 1991, the employer distributed American flags to employees in the plaintiff’s department and it was expected that all employees would display American flags at their workstations.

The plaintiff declined to display the American flag and further gave his opinion on the propriety of coercing or exerting pressure on employees to display the American flag.

After a suspension, he was fired by his employer on or about May 16, 1992.

The Supreme Court had two things to say on this. First, the Court held that the employee could raise a claim under a state law that an employee’s free speech claims were being violated. Again, i talked more about this law in a post last month.

But that’s only part of the decision. In the other half of the decision, the Court was asked to decide whether the employee actually had a free speech claim.

The Court reminds us first that not everything is a federal or even state case. “As a statutory matter, a statute that protects constitutional rights in the workplace should not be construed so as to transform every dispute about working conditions into a constitutional question.”

And then the court reminds us, in language that has direct implications for the discussion we’ve been having about standing for the national anthem, that the Complaint was missing a few essential aspects to rise to that level.

Significantly, the plaintiff has not alleged that: (1) he was directed to manifest his patriotism by saluting the flag or otherwise affirming his allegiance thereto; (2) he was directed to affix the flag to his person or to his private property; or (3) he was indirectly directed to associate himself with the symbolism of the flag because the location of his workstation was such that members of the public, or his fellow employees, reasonably could have attributed that symbolism to him personally.

Instead, the claim rested on the requirement for the Plaintiff to affix the flag to the workstation. The Court saw no meaningful difference to that act, versus an employer who did it for the employee — which would not violate the First Amendment.

A direction to the plaintiff to affix a flag to his workstation did not require him either to manifest or to clarify his personal political beliefs. Because a flag was to be affixed to each workstation, and because the plaintiff’s workstation was not exposed to public scrutiny, he was not required to assume the risk that others might attribute to him any political beliefs about the flag that he did not share. In other words, the direction to the plaintiff, as a matter of law, was not a “coercion of belief.”

Hmmm.

Now, if you’ve been paying attention, you’ve been seeing press reports that the NFL and its teams may require its players to stand at the national anthem. Let’s suppose that happened in Connecticut too and that a paid employee was fired for refusing.

Given the language in Cotto, could the employee allege that he “was directed to manifest his patriotism by saluting the flag or otherwise affirming his allegiance thereto” — a fact that was missing in the Cotto case?

That obviously is an unanswered question, but it just goes to show that you can learn a lot through your history.

But the decision has another piece that has been overlooked and which may cause employers some heartburn as well.

The “Negligent Infliction of Emotional Distress” cause of action has been on life support for the last decade or so as courts have limited its applicability for claims arising in the workplace.

Indeed, the Connecticut Supreme Court held back in 2002 that a claim for negligent infliction of emotional distress cannot arise from conduct occurring in an ongoing employment relationship, as distinguished from conduct occurring in the termination of employment.

But what should happen to claims by job applicants that allege that rescinded job offers have caused emotional distress?

It found that the allegation of the complaint — and specifically, that the employer knew that plaintiff suffered from post-traumatic stress disorder (PTSD) and then waited to rescind her job offer until one day before she was scheduled to begin work (and after she had already left her prior job), was sufficient to establish a possible claim. The allegations of the complaint were that such actions caused plaintiff to experience severe emotional distress, including anxiety, sleeplessness, and loss of appetite.

The Court, in its ruling, analyzed the decisions in Connecticut in the last 15 years and found that “Connecticut courts have not squarely decided whether a rescinded job offer could serve as the basis for a negligent infliction of emotional distress claim”:

The practical,workplace-related reasons … for precluding a claim for negligent infliction of emotional distress on the basis of events occurring in an ongoing employment relationship do not apply in the context of an employer who rescinds a job offer before the prospective employee can begin work. … Because the withdrawal of a job offer is more akin to termination than to conduct occurring in an ongoing employment relationship, it seems consistent … that a claim for negligent infliction of emotional distress could arise from the withdrawal of a job offer.

Although the decision itself shouldn’t necessarily change how employers manage their job offers (or withdrawals of job offers), it is a reminder to treat job applicants with some care. If an employer does need to withdraw the job offer, it should be done in a way to minimize the harm to the applicant.

The worry, of course, with the court’s decision is that there are going to be cases that allege that the mere withdrawal of the job offer is sufficient to state a claim; the court’s decision doesn’t go that far and it seems that the plaintiff’s allegation of PTSD was a significant factor in allowing the claim to proceed.

But employers who face such claims in the lawsuit should be sure to review the circumstances to see where on the spectrum the particular claim falls.

It never seems to fail; I go on vacation and the Connecticut Supreme Court issues one of the few employment law decisions it issues every year during that week.

Fortunately for all of us, it concerns the fluctuating work week method of overtime computation which most employers in the state consciously either avoid or try not to understand. (In very basic terms, the formula calculates a pay rate based on the number of hours an employee actually works in a particular weeks.)

I’ve previously discussed the “perils of trying to rely on a fluctuating work week.” As recently as 2012, I said that “while it can provide some benefit for employers, it must be done properly and must not be raised after the fact.” And I noted way back in 2008 that employers have to jump through a variety of hoops to make sure they are compliant.

Second, and perhaps most critical here, the Court said that Connecticut Department of Labor regulations that govern overtime pay for retail employees do prohibit the use of the fluctuating method for those employees:

By setting forth its own formula for mercantile employers to use when computing overtime pay, one that requires them to divide pay by the usual hours worked to calculate the regular hourly rate, the wage [regulation] leaves no room for an alternative calculation method….The wage order’s command to use a divide by usual hours method therefore precludes use of the fluctuating method’s divide by actual hours method, except, of course, when an employee’s actual hours match his usual hours.

It should be noted as well that while the case concerned retail employees, the regulation at issue applies to all businesses in the “mercantile trade.”

For employers that rely on the fluctuating workweek method of calculating overtime in Connecticut, this case is a good reminder to revisit those practices now to make sure they comply with this new Connecticut case. Seeking the advice of your trusted counsel to look at your particular circumstances is critical given the court’s decision.

The Connecticut Supreme Court, in a unanimous decision that will be officially released April 4, 2017, has ruled that employers may not use the “tip credit” for pizza delivery drivers and therefore, the employees must be paid the standard minimum wage.

You can download the decision in Amaral Brothers, Inc. v. Department of Labor here. The decision is no doubt a disappointment to employers who believe that the Connecticut Department of Labor’s regulations in this area far outstretch the plain language of the applicable wage/hour statute.

The case arises from a request by two Domino’s franchises for a “declaratory ruling” from the Connecticut Department of Labor (DOL) that delivery drivers are “persons, other than bartenders, who are employed in the hotel and restaurant industry, …who customarily and regularly receive gratuities.” The request arises from Conn. Gen. Stat. §31-60(b), which has been amended over the years.

Why would the employer make such a request? In doing so, the employer wanted to take advantage of the “tip credit”, in which employees are paid below the conventional minimum wage, but his or her salary is supplemented by tips from customers.

Originally, as noted by the employer’s brief to the Court: “The DOL denied Plaintiff’s Petition for the following stated reasons: (1) the regulations were valid because they served a remedial purpose, were time-tested and subject to judicial scrutiny…; and (2) the only act of “service” was handing the food to the customer at the customer’s door and so delivery drivers’ duties were not solely serving food as required under Regulations of Connecticut State Agencies § 31-62-E2(c). The DOL’s decision was that only employers of “service employees” as defined by the DOL could utilize the credit, and Plaintiff’s employees were not service employees.

A lower court upheld the DOL’s conclusions “agreeing that the regulations were ‘reasonable’, ‘time tested’, and had ‘received judicial scrutiny and legislative acquiescence’. The court also determined that the ‘minimum wage law should receive a liberal construction.'” (You can also view the DOL’s brief to the Court here.)

The Connecticut Supreme Court upheld the Department of Labor’s interpretations here finding that the regulations issued by the agency were “not incompatible” with the enabling statute. In doing so, the Court noted that this is a bit unusual because the employer was contending that the regulations were originally valid when issued, but repealed by implication when there was an amendment to the statute at issue.

The Court’s decision traced the origin of the tip credit in a portion of the decision that only lawyers will love. But then they get to the heart of the matter: “It was reasonable for the department to conclude that the legislature did not intend that employees such as delivery drivers, who have the potential to earn gratuities during only a small portion of their workday, would be subject to a reduction in their minimum wage with respect to time spent traveling to a customer’s home and other duties for which they do not earn gratuities.”

While the court’s decision directly implicates delivery drivers, it only impacts those employed directly by the employer (see also: UberEats, GrubHub etc.). Nevertheless, in upholding the DOL’s interpretation here, the scope of who falls within the tip credit at restaurants is going to be further challenged in the courts.

The Court’s decision is yet another reminder that restaurants in Connecticut should review the situations in which the tip credit is being utilized. Issues regarding tip pooling should be reviewed as well. This case doesn’t answer all the questions that come up in the restaurant context. But in terms of figuring out the scope of the law, it helps to answer (albeit in a manner not helpful to employers overall) some outstanding questions.

I still remain amazed at the sold-out crowd we had at last week’s Labor & Employment Law seminar. Well over 250 people registered for the program and I kind of wanted to whisper to people: “You know this is just a LEGAL seminar, right?”

But no matter. Employment law issues are as popular as ever and we had great feedback from the crowd.

One of the topics we handled was one suggested by several attendees at last year’s seminar: Transgender Issues in the Workplace. I’ve talked about this before in some prior posts here and here.

Just a day after our seminar, the U.S. Supreme Court accepted a case on this very topic — meaning we are likely to get some court guidance at last. Although the case involves student access to bathrooms, many are hoping that the decision provides some clarity to employers on the issue as well.

But as SCOTUSBlog notes, the court is tackling the issue from more of a technical perspective than anything else:

The Supreme Court added five new cases to its docket this afternoon. Among the new grants was Gloucester County School Board v. G.G., the case of a transgender student who identifies as a boy and wants to be allowed to use the boys’ bathroom at his Virginia high school.

Although the controversy over the school board’s policy requiring students to use the restrooms and locker rooms that match the gender that they were assigned at birth instantly became the highest-profile case of the court’s term so far, the dispute actually centers on more technical (and, some would say, rather dry) legal issues. In this case, the district court ruled against G.G., relying on a 1975 regulation that allows schools to provide “separate toilet, locker room, and shower facilities on the basis of sex,” as long as those facilities are comparable to those provided to the opposite sex. But, in January 2015, the Department of Education’s Office of Civil Rights issued an opinion letter stating that, if schools separate students in restrooms and locker rooms on the basis of their sex, a “school generally must treat transgender students consistent with their gender identity.” In light of the 2015 letter, the U.S. Court of Appeals for the 4th Circuit reversed and ruled for G.G. It relied on the Supreme Court’s 1997 decision in Auer v. Robbins, which held that courts generally should defer to an agency’s interpretation of its own regulation.

Still, to see issues of gender identity being heard at the U.S. Supreme Court shows how far this issue has come in a relatively short period of time.

Any decision from the court, however, is likely to have a muted impact in Connecticut. Connecticut already protects against discrimination on the basis of gender identity and expression, in contrast to federal law which isn’t as explicit.

At the seminar, one of my law partners, Kevin Roy, suggested that employers who feel flummoxed by the legal rules, should approach the issue from the perspective of trying to treat employees with “dignity and respect”. That may be the simplest and easiest way to tackle a still-evolving issue.

Thanks to all who came to our Labor & Employment seminar on Thursday. Our biggest crowd yet. In it, we talked about the importance of offer letters. Marc Herman returns today with a post updating us on a recent Connecticut Supreme Court decision that came out while I was on vacation a while back that makes that point even clearer.

Picture this: Jill works for you. You fire her as an at-will employee. Two weeks later, you receive a letter from Jill claiming that she is owed commission for several sales that she completed prior to her termination.

What should you do?

Let’s look at her offer letter. That it usually a good starting place.

Commission is only paid once work has been performed and invoiced to the client. Upon termination of employment, all commissions cease, except those commissions that have been invoiced to the client.

You look again at Jill’s letter and look-up her recent sales. You realize that the commission to which she refers relates to sales that had not yet been invoiced to the client when Jill was fired.

You excitedly draft a response to Jill – “Sorry, Jill – you’re out of luck!” (or words to that effect — your lawyer can probably help with the wording).

Jill sues you. She argues that you owe her money. Moreover, she argues that the commission provision is unenforceable as a matter of public policy — “you can’t deprive me of commission that I worked hard for!”

Now what?

Well, in a recent decision, the Connecticut Supreme Court concluded that provisions like the one above may be enforceable — and that employers may not have to pay a commission because of the language used in the offer letter.

In Geysen v. Securitas Security Services USA, Inc. (bearing facts very similar to Jill’s), a former employee argued that such compensation provisions are unenforceable as a matter of public policy and therefore his former employer had violated the law by not paying him commission.

The trial court agreed.

On appeal, the CT Supreme Court issued a thoughtful decision. It made two main points:

Point One: Parties should have the freedom to make contracts with unfavorable terms.

Point Two: You cannot draft a contract that simply tries to work-around the law. They violate public policy — A big no-no.

So what about provisions like the one above?

The easiest answer is that such provisions should pass legal muster. Sure, it may contain terms that favor the employer, but that’s ok because the parties bargained for it. Nor is it a work-around the law; the law simply requires that employers pay employees in accordance with any agreement.

After concluding that the provision was enforceable, the Court read it literally: no commission due. The Plaintiff’s hard work aside, he had previously agreed that no commission would be “due” prior to the client being invoiced.

The Court also agreed with the defendant-employer that the employee’s claim of wrongful discharge (as a matter of public policy) was also without merit. No violation of public policy and therefore no wrongful discharge.

Note, however: the Court left open the possibility that such practices could amount to a breach of the implied covenant of good faith and fair dealing. This really concerns the employer’s motive.

For example, an employer’s motive for firing an employee was simply to avoid paying commission, that would be a breach of the implied covenant of good faith.

What’s the lesson here? Agreements with employees are not unenforceable simply because they may seem unfair to the employee. However, apply caution in drafting agreements that seek to work-around the law.

So, it can really be no surprise that the agency wanted to expand who is covered by the state’s anti-discrimination laws.

But the Connecticut Supreme Court, as it has done before, was having none of it. The end result of the case is one that frankly is of interest more to employment lawyers than to the clients we serve.

The newest case, CHRO v. Echo Hose Ambulance, will be officially released this week. But we have an advance release opinion which makes it clear that unpaid volunteers — even those that serve in the volunteer ambulance corp — aren’t entitled to coverage under the state’s anti-discrimination laws.

Of course, the issue framed is slightly different; the court said it was called upon to determine “what test” should be applied to determine whether an unpaid volunteer is an ‘‘employee’’. “More specifically, we must decide whether a volunteer must satisfy the predominant ‘‘remuneration test’’ used to resolve similar federal causes of action or Connecticut’s common-law ‘‘right to control’’ test.”

The court concludes that the remuneration test is appropriate. The remuneration test instructs courts to ‘‘conduct a [two step] inquiry by requiring that a volunteer first show remuneration as a threshold matter before proceeding to the second step—analyzing the putative employment relationship under the [common-law] agency test. Remuneration may consist of either direct compensation, such as a salary or wages, or indirect benefits that are not merely incidental to the activity performed.”

About a decade ago, I had the good fortune to sit at a table with Justice Antonin Scalia over a long lunch. He was a distinguished speaker for the Young Lawyers’ Section of the Connecticut Bar Association and, as a former Chair of the that group, I lucked out in my seating arrangements.

I remember my parents were a bit puzzled at my excitement over the prospect of lunch with Justice Scalia. But I explained to them, that my excitement wasn’t because I agreed with all of his decisions or logic. I was looking forward to it because whenever there was a new case released, I would typically read his decisions (and often dissents) first.

Because to read his decisions was to appreciate a craft of writing that I could never even hope to replicate. Even on the many decisions of his that I disagreed with, I wanted to read his dissents to see what the weaknesses were in the majority’s arguments.

Justice Scalia’s legacy when it comes to employment law cases is far more confusing and complicated than you might think.

Indeed, he described the case as a “really easy” one. In doing so, he said that the applicant to a job, who was wearing a headscarf, only has to show that her need for the company to accommodate her religious beliefs was a “motivating factor” in its decision not to hire her.

Then look at another seeming “pro-employer” case. He joined a majority opinion in Gross v. FBL Financial Services, Inc. which made it harder for plaintiff-employees to prove discrimination by saying that age must be the “but-for” cause of the challenged employment action. That case was classic textualism — what did the text of the age discrimination law say?

But in Thompson v. North American Stainless, LP, he drafted the majority opinion expanding Title VII’s anti-retaliation provisions to cover people (such as another employee’s fiancee) within the “zone of interests” sought to be protected by the statute.

In short, Justice Scalia’s legacy on employment law cases is far more complex than some would give him credit for.

He left an indelible mark in how employment law cases are decided at the summary judgment stage through the St. Mary’s Honor Center v. Hicks case in 1993. That case held that the trier of fact’s rejection of an employer’s asserted reasons for its actions does not entitle a plaintiff to judgment as a matter of law in a discrimination case.

And to be sure, there are plenty of decisions that you could find fault in Scalia’s logic and, more than that, judgment.

His opinions against homosexuality were hurtful. He once wrote that “Many Americans do not want persons who openly engage in homosexual conduct as partners in their business, as scoutmasters for their children, as teachers in their children’s schools, or as boarders in their home”, and suggested nothing wrong with that. He should be remembered for those decisions as well.

But I look to other justices for a guide as to how we should judge the man too. Both Justice Kagan and Ginsburg loved him as a good friend — even when they disagreed with his decisions. I think that’s an enlightened position in an age where political purity is seen as a badge of honor.

So when I look back on Justice Scalia’s legacy, I’ll remember more than his well-written decisions. I’ll remember that lunch 10 years ago. I’ll remember talking with him about how he thought it completely logical that the court was deciding cases only by looking by the text of the U.S. Constitution. I’ll also remember a man during that lunch who was charming, witty and willing to share a good story with others.

In an unanimous decision that was released late this morning, the Connecticut Supreme Court ruled the limits to free speech limits established by the U.S. Supreme Court in its Garcetti decision — namely that speech pursuant to an employee’s official job duties was not protected — did not apply to claims brought under the Connecticut Constitution.

In other words, there are broad protections for employees who raise issues of public concern in both the private and public workplaces after this decision.

But the court left open the question of whether the Connecticut Constitution provide an independent and greater right of free speech for public (and even private) employees than the First Amendment of the U.S. Constitution. In doing, the court stated: “We decline to reach the state constitutional issue raised in the plaintiff’s alternative ground for affirmance….”

In so ruling, the court is bringing its ruling back in line with the modified “Pickering/Connick” test outlined years ago by the court. The rule does not use the bright-line test of Garcetti, but still afford some protection to employers. We’re reviewing exactly what that means today.

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About Dan

Daniel A. Schwartz created the Connecticut Employment Law Blog in 2007 with the goal of sharing new and noteworthy items relating to employment law with employers, human resources personnel, and executives in Connecticut. Since then, the blog has been recognized by the ABA Journal, and was one of ten named to the “Blog Hall of Fame” in recognition of the blog’s contributions and consistency over the years.